I am moving my view back to neutral with a bias to the neutral side for today primarily due to the evolving geopolitical situation in the Middle East. At the moment there is no shortage of oil anyplace in the world but the market is slowly building a risk premium into the price of oil in anticipation of a spreading of the fighting taking place between Israel and Hamas as well as the civil war in Syria.
The geopolitical risk is currently the only bullish price driver for oil as the current fundamentals as well as the slowing of the global economy are both bearish price drivers for oil. In the short term the price of oil will move based on the evolution of the situation in the Middle East. This is an event driven move in the price of oil at the moment. BE CAUTIOUS as oil prices could decline even quickly from current levels if and when a truce is announced.
I am keeping my Nat Gas price view at neutral as the fundamentals and technicals are once again keeping suggesting that the market may have topped out for the short term. I anticipate that the market will remain in a trading range until it becomes clearer as to how the heating season will evolve.
This week the EIA will release the report one day early... on November 21st at 12 noon as the US markets and government is closed on Thursday for the Thanksgiving holiday. This week I am projecting a withdrawal of 25 BCF from inventory. My projection for this week is shown in the following table and is based on a week that experienced a modest amount of Nat Gas heating related demand. My projection compares to last year's net injection of 9 BCF and the normal five year net injection for the same week of 3 BCF. Bottom line the inventory surplus will narrow modestly again this week versus last year and the five year average if the actual numbers are in sync with my projections. This week's net withdrawal will be well below the injection level for last year and the five year average for the same week if the actual outcome is in sync with my forecast. For interest the average for the injection season to date has been around 68.6% of last year.
If the actual EIA data is in line with my projections the year over year surplus will narrow to around 36 BCF. The surplus versus the five year average for the same week will narrow to around 182 BCF. This will be a bullish weekly fundamental snapshot if the actual data is in line with my projection. The early industry projections are coming in a wide range of -7 BCF to -40 BCF with the consensus around a draw of 24 BCF.
Markets are mostly higher into the US trading session as shown in the following table.
Dominick A. Chirichella